Inquiry decides on ATO’s multimillion-dollar fitout in Festival Tower Two
A committee investigating the tax office’s $73.4 million move into Adelaide’s new Festival Plaza skyscraper has made its call.
Festival Tower Two’s first tenants have won a green light from the Commonwealth Public Works Committee for a $73.4 million fitout across eleven floors in Adelaide’s new skyscraper.
The committee, chaired by SA Labor MP Tony Zappia found the Australian Taxation Office works should go ahead despite some submissions opposing the move from its current Franklin Street home.
But its report also said the Auditor-General should conduct an audit into the management and administration of the Australian Taxation Office’s property portfolio, lease arrangements and location strategy.
The report acknowledged “well-publicised opposition to the development of Festival Tower Two” but said this broader development was a matter for the SA Planning Commission.
Under the plan, more than 2,000 ATO staff will work across 19,000 square metres in the new building, with the tax office arguing that the move was necessary due to the age, size and lack of serviceability of its current headquarters at 26 Franklin Street, currently owned by funds management group Charter Hall.
This latest decision clears a major hurdle for the move. It now needs to be passed by the House of Representatives before the ATO can start its fit-out in April 2027, with practical completion slated for October next year.
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In the inquiry, the ATO argued its Franklin St premises were built in 2012 and have been the home of its Adelaide branch for fifteen years. It cost $54.2 million to fit out that office.
“In this instance, the evidence given to the committee demonstrated that the ATO has undertaken sufficient value for money assessments on the options available to it. Importantly, the committee understands that the ATO was unable to receive sufficient assurance that a refurbished office fit-out at its existing premises could meet all of its essential requirements for the works,” it found.
The ATO has agreed to a ten-year lease at Festival Tower Two being built by Walker Corporation, starting in November 2027, with its current lease at Franklin Street expiring at the same time.
The committee found the ATO could not refurbish its existing premises in a way that “could meet all essential requirements for the works”, and believed the new ATO move was value for money.
Several submissions contested the ATO’s argument that the current fit-out was at end-of-life, including Barry Mitchell, who believed the ATO’s submission “dismisses with very little evidence, justification, or any rigorous cost analysis, the options of either remaining on the present site, or relocating to a vacant site owned by either state or Commonwealth government”.
SA Planning Minister Nick Champion has previously described the new 34-storey Festival Tower Two as “an investment in Adelaide’s future”.
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Robert Farnan, on behalf of the Save Festival Plaza Alliance, described the ATO’s decision to leave a “near new building in a perfectly central and accessible location” as “highly irrational and counterproductive”.
Save Festival Plaza Alliance member Geoff Hayter was disappointed by the committee decision, claiming it was expensive space per square metre and did not appear to address “when vacancies are very high in the market, as they are at the moment, tenant incentives come into play”.
He said these could include rent-free periods, but he was concerned that the commercial terms of the ATO move were not in the public realm.
The 38-storey Festival Tower 2 has faced significant community backlash over heritage concerns and potential misuse of public land.
In a submission to the committee, the ATO argued the works were necessary to maintain a long-term presence in SA and that the current fit-out was “not consistent with a modern workplace for technology, amenity, collaboration, serviceability or flexibility.”
The submission also stated that the ATO had considered three options: exercise an option to extend the lease at Charter House and undertake renovations, utilise existing surplus Commonwealth accommodation, or undertake an open-market approach for the reduced ‘net lettable area’ and fit out the subsequent leased space.
Hayter said there was another option the ATO had not considered.
“There’s a fourth option they didn’t list, and that was to renegotiate a new lease with Charter Hall at Franklin Street over a reduced area, and that they negotiate to use some or not use some of the existing fit-out as appropriate,” he said.
“There’s no need to throw the baby out with the bathwater.
“They go from 30 [thousand square meters] to 19, so there’d be 11,000 square meters vacant in that building that they could be refitting to the ATO’s new specification, and then decanting themselves into it over a slightly longer period.”
The fitout includes nearly 2,000 individual and collaborative work spaces, a secure lobby with race gates and facilities for corporate functions.
The ATO’s submission said the move would create value for money by “improving occupational density and reducing overall lease and outgoing property costs.”
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